25/06/2018 11:03 SAST | Updated 25/06/2018 12:36 SAST

A Helicopter, Sports Cars And A Missing R900m — Everything You Need To Know About The VBS Bank Drama

Reports allege the bank's shareholders used depositor's money, some of which belonging to municipalities, to finance their own lifestyles.

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VBS Mutual Bank is once again in the spotlight, this time over allegations that its shareholders plundered the institution's finances to sponsor their extravagant lifestyles.

What's now at stake is about R1.5-billion of taxpayer money deposited into the embattled bank by more than a dozen municipalities in various provinces. The Public Investment Corporation, which manages the Government Employees Pension Fund (GEPF) and is one of the bank's largest shareholders, also stands to lose millions.

According to separate reports by Sunday Times and City Press over the weekend, this is what you need to know:

- At the centre of the allegations are bank shareholder (and Vhavenda king) Toni Mphephu Ramabulana; the bank's former chairman and Vele Investments founder Tshifhiwa Matodzi; and Vele Investments CEO Robert Madzonga. Vele Investments is the bank's largest shareholder.

- It is alleged the trio used hundreds of millions in depositors' funds to pay for their lavish lifestyles, which includes a helicopter for the king, luxury apartments, designer clothing, and sports cars. This was reportedly done through a series of vehicle finance deals, mortgage bonds and complex intercompany loans between VBS, Vele Investments and its subsidiaries.

- About R900-million is said to be unaccounted for.

VBS and the municipalities

Last week, Minister of Cooperative Governance and Traditional Affairs Zweli Mkhize met with the mayors and municipal managers of 14 municipalities that invested funds in VBS. The municipalities, from Gauteng, North West and Limpopo, reported that between them they deposited a total of R1.5-billion in VBS as part of short-term investments.

The municipal deposits are under a cloud. Documents City Press obtained show, in one case, how a municipal manager ordered a subordinate to deposit R50-million into a VBS account within 30 minutes. This was reportedly done in the middle of the first "liquidity stress event" the bank experienced last year.

In March this year, South African Reserve Bank governor Lesetja Kganyago placed the bank under curatorship, citing issues it faced with its liquidity.

It came after VBS, a small institution in comparison to the country's larger commercial lenders, began lobbying municipalities to entrust it with their deposits. As a result, the bank's books doubled. But last year, Treasury put a stop to the deposits because of legislation that dictates that municipalities may only make deposits with full commercial financial institutions — VBS is a mutual bank, and is not held to the same standard as a commercial bank.

This resulted in a liquidity crisis.

The bank granted first came under the microscopic after it granted former president Jacob Zuma a loan to finance the R7.8-million he owed for the upgrades of his private residence in Nkandla.